Date: 19990608
Docket: 98-866-IT-I
BETWEEN:
THÉRÈSE LESSARD CARTIER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
P.R. Dussault, J.T.C.C.
[1] The appellant is contesting an assessment issued by the Minister of National Revenue (“the Minister”) under section 160 of the Income Tax Act (“the Act”), notice of which is dated November 22, 1996, and numbered 08488. Through that assessment, the Minister is claiming an amount of $7,060.66 from the appellant as a result of a transfer by her spouse, Roger Cartier, of the undivided half of a residence located at 78 Rue Des Chênes in Ste-Thérèse de Blainville, Quebec, around June 13, 1991.
[2] Subparagraph 3(a) of the Reply to the Notice of Appeal states that Mr. Cartier’s tax liability was $7,060.66 for his 1989, 1990 and 1991 taxation years. That amount is not in dispute, although the appellant did say that Mr. Cartier has made some payments on that liability.
[3] The appellant and Mr. Cartier were married under the regime of separation of property pursuant to a marriage contract signed before a notary on June 18, 1969. Article 4 of the contract (Exhibit A-2) contains an irrevocable gift inter vivos of movable property worth $2,000.00 from Mr. Cartier to the appellant and a similar gift of $20,000.00 in the following terms:
[TRANSLATION]
The sum of TWENTY THOUSAND DOLLARS ($20,000.00) ---------------, which the future husband undertakes to pay to the future wife at any time during the marriage, in whole or in part, in the form of the movable or immovable property of his choice once he feels that he can afford to pay it. If he does not pay it during his lifetime, the future wife may claim it from the future husband’s succession in preference to any legatee or heir, but she shall do so in the easiest order of realization, that is, she shall take the proceeds of life insurance policies first, then the movable property and, only after that, the immovable property.
[4] In 1986, the appellant and Mr. Cartier together purchased the residence in question here for about $92,000.00. For that purpose, they took out from the CIBC Mortgage Corporation a loan of about $73,000.00 secured by a mortgage.
[5] In 1988, Mr. Cartier apparently borrowed an additional amount to consolidate his debts. The total amount of the loans secured by the mortgage on the residence thus increased to $90,000.00.
[6] In the spring of 1991, when the appellant and her spouse were a few months behind in their mortgage payments, they received a 60-day notice from the mortgagee, the CIBC Mortgage Corporation.
[7] Pursuant to an arrangement with that corporation, and after the appellant paid $3,300.00 in arrears, it was agreed that Mr. Cartier would transfer his undivided portion of the residence to the appellant, who would assume the entire debt secured by the mortgage.
[8] At about the same time, Mr. Cartier apparently stopped living with the appellant. The appellant instituted divorce proceedings in October 1998.
[9] On June 13, 1991, by notarial deed (Exhibit A-1), Mr. Cartier transferred his undivided half of the residence to the appellant for a price set out in the following terms:
[TRANSLATION]
This sale is being made at the price and for the amount of ONE DOLLAR ($1.00), receipt whereof from the purchaser on the signature hereof is hereby acknowledged by the vendor and a general and final release is hereby given.
This sale is also being made on condition that the purchaser, who undertakes so to do, pay, for the vendor and for his discharge, any amount owed to the CIBC MORTGAGE CORPORATION, 300 Boulevard Sicard, Ste-Thérèse, QC J7E 3X5, under the deed of loan received by notary Jean Blanchard on the thirty-first day of March nineteen hundred and eighty-eight (1988) and registered at the Terrebonne registry office as number 822207.
That amount shall be repayable in accordance with the terms and conditions set out in the above-mentioned deed of loan registered as number 822207, which the purchaser declares that she is familiar with.
The vendor hereby waives his vendor’s privilege.
[10] According to the appellant, the debt owed to the CIBC Mortgage Corporation on June 13, 1991, was about $71,000.00, or $84,891.00 minus the $13,203.00 she had paid a few days earlier.
[11] The value indicated in the contract for the undivided portion of the residence transferred by Mr. Cartier to the appellant was $61,750.00, and the total value of the residence was set at $123,500.00. Those are the values relied on by the Minister to assess the appellant and referred to in subparagraphs 3(f) and (g) of the Reply to the Notice of Appeal, and they are not in dispute.
[12] As noted by counsel for the respondent, the transfer thus resulted in a $19,304.00 profit for the appellant, who provided consideration of $42,446.00 ($84,891.00 ÷ 2 + $1.00) for property worth $61,750.00. However, the assessment was for only $7,060.66, which was the amount owed by Mr. Cartier for his 1989, 1990 and 1991 taxation years at the time of the assessment.
[13] Although the appellant raised as an argument the $20,000.00 gift provided for in the marriage contract, counsel for the respondent was of the opinion that the price set out in the contract of sale of June 13, 1991, did not justify an inference that the parties intended to take that gift into account for the purposes of the transaction.
[14] I agree with counsel for the respondent. The wording of the price clause in the contract of sale of June 13, 1991, is clear and not subject to interpretation. If the parties had wanted the consideration to include the payment of the debt incurred by Mr. Cartier when the appellant accepted the irrevocable gift inter vivos of $20,000.00 made in the marriage contract, they would have said so. The transfer to the appellant could have been made by Mr. Cartier for consideration that included the payment of his $20,000.00 debt to her, and she would then have discharged him with respect to that amount.[1] The parties obviously did not think of this, and it is clear that they were not advised by the notary on this point. Unfortunately, I cannot make up for their oversight now. As well, I will say in closing my remarks on this issue that, in her divorce proceedings against Mr. Cartier, the appellant asked the court to [TRANSLATION] “[order] the respondent to pay the applicant $20,000.00 in fulfilment of the gift undertaking set out in the marriage contract” (see Exhibit A-3, page 5). This shows that the appellant still believed that that debt had not yet been paid.
[15] I merely add that the contract of sale of June 13, 1991, also cannot be interpreted as a written separation agreement so as to permit reliance on the special rule set out in subsection 160(4) of the Act. No reference is made therein to the separation of the spouses, and the address given as their domicile is the same, namely that of the residence in question here. The contract also provides that the appellant is to become the absolute owner as of the date of the contract, and that she is to have possession and occupancy as of the same date.[2]
[16] As a result of the foregoing, the appeal is dismissed.
Signed at Ottawa, Canada, this 8th day of June 1999.
“P.R. Dussault”
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 29th day of March 2000.
Erich Klein, Revisor
[1] In Furfaro-Siconolfi v. The Queen, 90 DTC 6237 (F.C.T.D.), it was established that, for the purposes of section 160 of the Act, the transfer of property in the case of a gift inter vivos by marriage contract occurs on the date the contract is signed and that from that point forward the donor is simply a debtor for the amount given.
[2] On this point, reference may be made to the decision I rendered in Barroso v. The Queen, 97 DTC 338. That decision was affirmed by the Federal Court of Appeal, 98 DTC 6605.